A central record-keeping agency for pension funds is close to becoming a reality. The securities market regulator has approved a proposal to this effect by the National Securities Depositories Ltd (NSDL), which will help millions of pension fund subscribers to plan their retirement much earlier in their working life.
Sources said Sebi had cleared the proposal last week with a set of conditions to set up the agency, which will keep records of transactions by investors. The agency will allow pension fund contributors to switch between many schemes to be offered by fund managers appointed by the government, based on their performance.
The Pension Fund Regulatory Authority of India, which regulates the sector, has appointed three entities?UTI Mutual Fund, Life Insurance Corporation of India, and State Bank of India?to act as fund managers. They will devise schemes and offer them to subscribers based on risk-taking capacity and their expected return from investment.
The agency will work on the lines of a depository in the secondary market. Each individual that joins the new pension system will be allotted a unique personal retirement account (PRA) number. A member will accrete savings towards retirement into the PRA throughout his or her working life. The PRA remains unchanged regardless of employment status, employer or location.
The new pension system will be applicable initially to the Central government employees who were hired after January 1, 2004.